The Portuguese Government approved on Thursday, in the Council of Ministers, a bill that exempts from IRS the financial compensation granted to victims of sexual abuse in the Catholic Church and to victims in comparable situations. The law extends the regime to abuse cases involving minors and vulnerable adults that occurred in other institutional contexts, as long as recognised by the State.
In a statement issued after the meeting, the executive justified the measure based on the reparative nature of the compensation, which is intended to redress moral damages and should therefore not be treated as taxable income. The Government argues that the bill ensures a tax treatment consistent with that already applied to court-ordered compensation.
Intention made public in April
The intention to exempt this compensation from taxation was announced by the Ministry of Finance on 18 April, with a commitment to submit a bill to parliament.
Days earlier, the then president of the Portuguese Episcopal Conference (CEP), José Ornelas, had argued that taxing the compensation paid to victims was not "ethically acceptable".
The same position was reaffirmed by the current CEP president, Virgílio Antunes, elected during the plenary assembly of the Portuguese episcopate held in Fátima. The Bishop of Coimbra described the exemption as a matter of justice and a sign of solidarity from Portuguese society and the State towards a cause that, in his view, does not concern only the Church.
57 victims with compensation between 9,000 and 45,000 euros
On 26 March, the CEP announced that each of the 57 victims of sexual abuse whose compensation request had been approved would receive between 9,000 and 45,000 euros, totalling more than 1.5 million euros.
With the approval of the bill, these amounts will be received in full by the victims, with no IRS withholding, in line with the treatment already given to court-awarded compensation for moral damages.
What changes for the victims
In practice, the approval of this bill means that:
- Compensation paid by the Catholic Church will no longer be considered taxable income for IRS purposes.
- The regime also applies to victims of abuse in other institutional contexts, provided they are recognised by the State.
- The tax treatment is now aligned with compensation for moral damages awarded by court decision.
Next steps in parliament
The bill now moves to the Assembly of the Republic, where it must be debated and voted on. Only after publication in the Official Gazette will the regime effectively enter into force, possibly with retroactive application to cover compensation already paid.
How Grupo Your follows these matters
At Grupo Your we closely monitor legislative changes with fiscal impact, ensuring that individuals and companies have access to accurate and up-to-date information. In sensitive cases such as the tax treatment of compensation and damages, expert advice is essential to avoid filing errors and ensure full compliance with the law.
If you have any doubts about the tax treatment of compensation or damages received, get in touch. Our accounting and tax team can help clarify the treatment applicable to each case.
